TMI Blog2019 (2) TMI 1805X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid decisions of the Tribunal, we exclude Engineers India Ltd., Rites Ltd. and WAPCOS Ltd. from the list of comparables and direct the Assessing Officer to compute the arm s length price accordingly. Considering the submissions of the learned Authorised Representative that upon exclusion of these three comparables, the margin shown by the assessee would fall within 5% of the average margin of the remaining comparables, hence, no adjustment is required to be made to the arm s length price. - IT(TP)A no.1964/Mum./2016, 1858/Mum./2016 - - - Dated:- 22-2-2019 - Shri Saktijit Dey, Judicial Member And Shri M. Balaganesh, Accountant Member Assessee by: Shri Niraj Sheth Revenue by: Shri Anand Mohan ORDER Saktijit Dey, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prises (AE), made a reference to the Transfer Pricing Officer for determining arm s length price of the international transaction. In the course of proceedings before him, the Transfer Pricing Officer noticed that the assessee in the relevant previous year has entered into various international transactions with it s AEs in U.K. and U.S.A. On verifying the transfer pricing study report of the assessee he noticed that provision of engineering design and consulting services rendered by the assessee to the AE and engineering services availed have been benchmarked by applying Transactional Net Margin Method (TNMM) as the most appropriate method with Operating Profit to Operating Cost (OP/OC) as the Profit Level Indicator (PLI). He noticed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Rites Lt. (Consultancy Services segment) 69.58% 4. Simon India Ltd. 24.59% 5. TCE Consulting Engineers Ltd. 44.62% 6. WAPCOS Ltd. (Consultancy Engineering Projects segment) 37.32% 6. Since, the arithmetic mean margin of the comparables selected by the Transfer Pricing Officer was 37.35%, as against entity level margin of 9.35% of the assessee as computed by the Transfer Pricing Officer, an adjustment of ₹ 31,15,17,429, was made to the arm s length price. On the basis of the order passed by the Transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and if the companies are found to be fully owned by the Government they cannot be treated as comparable. 9. We have considered rival submissions and perused material on record. The only reason on which the assessee seeks exclusion of the aforesaid three companies is, they are Government Companies, hence, cannot be treated as comparable to the assessee. Notably, while deciding assessee s appeal for the assessment year 2008 09 in ITA no.7194/Mum./2012, dated 17th May 2017, the Tribunal relying upon certain judicial precedents has held that Engineers India Ltd. being a Government Company cannot be treated as comparable since the Contracts between the PSU and others are not driven by profit motive alone but other considerations also weigh i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 14A of the Act. 12. The primary reason on which the assessee seeks deletion of the aforesaid disallowance is, in the relevant assessment year the assessee has not earned any dividend income, therefore, no disallowance under section 14A of the Act could be made. However, at the time of hearing, the learned Authorised Representative did not want to press the ground due to smallness of the addition. Though, in principle, we agree with the submissions of the learned Authorised Representative that in the absence of any exempt income earned during the relevant assessment year no disallowance under section 14A of the Act can be made, however, considering the submissions of the learned Authorised Representative that due to smallness of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of engineering service and the Revenue earned from engineering service constitute 91.79% of the gross revenue earned by the company. He submitted, the income earned by the assessee from provision of engineering services constitutes about 99% of the gross revenue, therefore, there is not much difference in the functionality and the comparable. Thus, he submitted that the DRP was justified in including the company as a comparable. 19. We have considered rival submissions and perused material on record. It is evident, the Transfer Pricing Officer has rejected this company as a comparable simply on the reasoning that it is involved in other activities. However, the DRP after verifying the annual report of the company has given a fac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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